Shipping Chaos
There’s going to be chaos while this all sorts itself out, with port congestion and inefficient re-routing. It’ll cause a surge in freight rates as inefficiency ties up ships and constrains capacity.
Chiswick, West London
Wednesday, October 15
By Tom Dyson, Investment Director
Absolute mayhem in the shipping world…
Earlier this year, the US introduced special port fees targeting China-linked vessels. Yesterday, China introduced special port fees targeting US-linked vessels. They only announced it last week, so the news took everyone by surprise. They’re like two kids playing tit-for-tat, except it’s the world’s two largest economies with billions in trade at stake.
The MV Manukai, a container ship owned by the US-based firm Matson, was the first victim. It paid a port fee of 4.5 million yuan ($627,000) to dock in Ningbo port yesterday. More below.
Greetings from Chiswick, West London…
The Dow/Gold ratio hit a new low today…touching 11. It’s too soon to get excited as the Dow still has another 55% to fall in terms of gold in order to hit our “sell gold buy stocks” trigger. But still, it’s nice to see the April bounce reversed and we’re hitting new bear market lows.
We’re keeping the dial set to Maximum Safety.
I won’t bother going into the details of the new Chinese port fees because it’s too complicated and no one’s really sure how this is going to work in practice. But the bottom line seems to be, if you own China-built ships it’s going to be very expensive for your vessels to visit US ports.
And if you don’t own China-built ships, or you have strong ties to the USA, it’ll cost you a fortune to visit Chinese ports. That’s a gross oversimplification but that’s the gist. It’s going to cause hundreds of vessels to reroute.
In these early days, it’s almost impossible to predict how things will shake out for individual shipping companies. Shipping companies are scrambling to get onside…by diverting ships, selling ships, issuing special voting shares, clearing board seats of US citizens, and issuing press releases.